Being Well: A New Dream for Homeowners?

Refinancing your home can free cash for other purposes. Plus, get your kids off the couch.

by Lisa Chase

Vincent Ingui, president and CEO of Louviers Mortgage Corporation in Wilmington, recommends buying a new home with an interest-only mortgage. photograph by Christian Kaye http://www.transitdesigns.com

Vincent Ingui hopes to change the way Delawareans think about their mortgage through his “redefining the American dream” philosophy.

“All of us have been told our entire lives, from our grandparents to our parents, that we should pay off the mortgage—pay down the principal as fast as possible so that you own your home,” says Ingui, president and CEO of Louviers Mortgage Corporation in Wilmington. He thinks the concept is flawed, so he recommends refinancing a home or purchasing a new one with an interest-only mortgage.

Several types of mortgages exist, each with unique advantages and disadvantages. Traditional fixed-rate mortgages freeze the amount of interest you pay on the loan so that your monthly payment remains the same for the term. With an adjustable rate mortgage, interest fluctuates with the prime lending rate and other factors, so monthly payments change accordingly. Either way, a fully amortized mortgage requires the lendee to pay interest and principal monthly, which reduces the balance over time.

Interest-only mortgages, however, require payment only on the interest, freeing more cash for the borrower. The option to pay interest only lasts for a specified period, generally no more than 10 years. Because there is no repayment of principal, the loan balance remains unchanged. But interest-only loans can increase liquidity for buyers and refinancers.

Consider this scenario: Mr. and Mrs. Borrower earn $100,000 a year and hold a $350,000 mortgage at 7 percent interest. Their monthly payment, interest and principal, is $2,328 per month. They’re also paying $300 a month on $10,000 of credit card debt at an interest rate of almost 15 percent. If they consolidate the debts through an interest-only mortgage of 6 percent for $365,000 paid over 30 years, they’d lower their monthly payment to $1,825, saving $803.

That $803 can be invested in a way that will provide consistent growth. But to build wealth, you must invest in something with a rate of return that is higher than the interest rate on your mortgage.

“We consult our clients in tandem with a financial advisor and-or a CPA to discuss options and where and how to invest that money,” Ingui says. “We do not advise our clients to remove equity from their home to invest. However, we do show them how to restructure their debt to optimize their mortgage and accelerate the growth of their nest egg.”

The approach will work only for savers, Ingui says, not big spenders who live beyond their means.

“If we show the habitual spender an $800 increase in cash flow, they must be disciplined in saving that money,” he says. “The only hope for the habitual spender is to put them in touch with a financial advisor who will develop a budget for them to implement and execute the plan over the long haul.”

Louviers Mortgage Corporation isn’t the only company to offer interest-only mortgages, but it is unique in at least one aspect: A portion of each loan’s proceeds go to the American Cancer Society. Ingui’s victory over Hodgkin’s disease increased his desire to help people. Louviers also supports the Sunshine Foundation, the Salvation Army, The American Red Cross, Junior Achievement and other organizations.

Get Moving

Tired of seeing your child glued to the X-Box, MP3 player blasting in his ears while he IMs his buddies from the laptop?

Though there are no definitive studies out yet, kids could be over-stimulated through the endless use of gadgets, which means they’re not getting enough physical exercise.

Time to unplug them, make them have real time with the real world, says Dr. Neil Izenberg, founder and editor-in-chief of Wilmington-based KidsHealth.org.

“There’s no turning back the clock with respect to technology, but because of it, more kids are much more sedentary than before there were Game Boys and iPods, and they need to go outside and play,” Izenberg says. “They’re also using technology to communicate with their friends. They need more down time to simply connect with them in person.”

The Kaiser Family Foundation, a nonprofit leader on health policy and healthcare issues, recently found that children and teens are spending more time using new media like computers and video games, without cutting back on the time they spend with standbys such as TV and print.

“Kids are multi-tasking and consuming many different kinds of media all at once,” according to Drew Altman, president and CEO of the Kaiser Family Foundation. “Multi-tasking is a growing phenomenon in media use, and we don’t know whether it’s good or bad or both.”

The Academy of Pediatrics advises that no child have more than two hours of television time or computer games a day. Not that all that gadgetry is a totally bad thing. The multi-wired environment is actually making youngsters masters at multitasking, Izenberg says, which could be good preparation for later life.

There are some new reports that indicate that not all videos are bad, especially those that require the children to get moving, such as Dance Revolution, first rolled out in Japanese video arcades in 1998. Now available for home video game consoles, it requires kids to dance according to cues on screen. Some moves get quite complicated. “That’s actually proven to be good exercise for them,” Izenberg says.

Part of the phenomenon is that the standards of media consumption have risen greatly, Izenberg says. “That challenges educators and the like to be more entertaining to capture the child’s attention,” he says. “It’s interesting to note that it was rare that someone might complain about a child sitting around for hours and reading a book.”

Identity Crisis

When traveling this summer, keep close watch on those credit cards and passports, and lock up important papers at home. Don’t even leave a utility bill sitting out—it’s got your PII (personally identifiable information) on it—and it can be stolen.

As a result, you might become the owner of a half-million dollar home or new Lexus—not necessarily by choice.

Identity theft is one of the scariest crimes because it can ruin your reputation.

Personally identifiable information includes: your name, Social Security number, driver’s license number, address, bank account numbers, credit card numbers—even your mother’s maiden name. Once provided to another party, it is very difficult to keep them from using it or disseminating it to others.

Though there are no known statistics on the individual cost of identity theft for Delaware, it can quickly reach thousands of dollars, says Deputy Attorney General Sean P. Lugg.

“In most instances, identity theft victims find that the personal and professional damage far outweighs the financial impact, and is incredibly difficult to rectify,” Lugg says. “Many victims suffer years of anguish as they fight to reclaim their identity, clean their credit and clear their good name.”

If your identity has been stolen, report the crime immediately to local law enforcement, the FBI and the Federal Trade Commission, as well as credit reporting institutions Equifax Credit Information Services, Trans Union and Experian Information Solutions. At the same time, request copies of your credit reports. Victims may also apply to the Attorney General’s Office for an identity theft passport.

You can also freeze your credit reports, thanks to a new Delaware law, for a $20 payment to the credit reporting agencies. The consumer then receives a password that enables him to lift the freeze when his credit must be accessed. The process is best for shoppers who make planned purchases, not spendthrifts who routinely make spontaneous, big-ticket purchases.

“Vigilance is imperative,” Lugg says. “Individuals must recognize the value of their personal information and take steps to protect it. The level or amount of protection for each individual varies with their individual tolerance for risk.”

High protection includes establishing a post office box for all mail and acquiring large items (house, car) in the name of a corporation. Though such tactics will reduce compromising personal information, many may find it inconvenient, burdensome and expensive.

But keep in mind that people sift through recycling bins and trash looking for personal information and also pilfer it off the Internet.

“Identity theft is a crime that continues to grow in its breadth and scope,” Lugg says. “Regular review of credit reports, bills and financial statements is imperative. Victims who identify the existence of the crime early in the process are best suited for recovery.”

Lugg recommends the following to reduce risk of identity theft:

• Never give personal information over the phone or Internet unless you initiate it.

• Remove Social Security cards, pin numbers and passwords from wallets and pocketbooks.

• Keep copies of bank account numbers and the front and back of credit cards in a secure place.

• Deal only with reputable vendors and guard purchase receipts. Check bills and credit card for unauthorized charges and discrepancies.

• Keep sensitive information and private information locked away.

• Shred all papers containing personal, financial or confidential information. Use passwords that are difficult to guess.

• Use a locked mailbox for incoming mail and place outgoing mail in a secure box.